FTC investigating Reddit over AI data-licensing practices ahead of IPO

Reddit said Friday that the Federal Trade Commission sent a letter to the company about its data-licensing business related to the training of third-party artificial intelligence systems.

“On March 14, 2024, we received a letter from the FTC advising us that the FTC’s staff is conducting a non-public inquiry focused on our sale, licensing, or sharing of user-generated content with third parties to train AI models,” Reddit said in an updated IPO prospectus. Reddit filed for an IPO in February, and plans to trade on the New York Stock Exchange under the ticker symbol “RDDT.”

Although Reddit’s core business relies on online advertising, the company detailed other possible monetization efforts, and is engaged in the “early stages” of its “data licensing efforts,” the filing said.

The company said it believes that “the opportunity does not conflict with our values and the rights of our Redditors,” which refers to the company’s user base that includes moderators.

“These programs may subject us to evolving approaches to the regulation of this data and implicates complex and developing data privacy and data protection, misappropriation, and intellectual property laws, rules, and regulations,” Reddit said.

Reddit said that it is “not surprised that the FTC has expressed interest” in its inquiring about its data-licensing business, considering “the novel nature of these technologies and commercial arrangements.”

“We do not believe that we have engaged in any unfair or deceptive trade practice,” Reddit said in the filing. “The letter indicated that the FTC staff was interested in meeting with us to learn more about our plans and that the FTC intended to request information and documents from us as its inquiry continues.”

Reddit noted that any dealings involving regulators could be “lengthy and unpredictable” and could result in “substantial costs” and other probes and product changes that could “require us to change our policies or practices, divert management and other resources from our business, or otherwise adversely impact our business, results of operations, financial condition, and prospects.”

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